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Judgment
The present company appeal has been filed under Section 482 of the Companies Act, 1956 against order dated 12/01/2004 passed by the learned Company Judge in Company Petition No.12/1992.
The facts of the case reveal that the respondent No.1 Company M/s. Binod Mills Co. Pvt. Ltd. is the company under liquidation and a Official Liquidator has been appointed by this Court. A notice was issued in respect of sale of land
belonging to the Company and in the company petition OLRs were filed on 20/02/2003 and 08/07/2003 for grant of permission to sell the land and building of the company in liquidation and an objection was preferred by the State of Madhya Pradesh (the appellant before this Court) on 15/05/2003. The learned Company Judge has dismissed the objection raised by the State of Madhya Pradesh.
The most unfortunate part in the present case is that right from the year 2004 till date the workers are suffering. There is a list on record as Annex.-A/3 which is part of IA.No.5919/2013 and the same reveals that about 1200 workmen have expired during the pendency of the company petition and most of the workmen reached the age of 70 years and they are suffering from various diseases.
The objection raised by the State of Madhya Pradesh was heard by the learned Single Judge and the learned Single Judge in paragraphs No.13 to 18 has held as under:-
"13. This takes me to yet another prayer made by O.L. In his report, dated 20.02.2003, 8.07.2003, praying therein a permission to sell the land and building of the company in liquidation as detailed in these reports.
In the aforementioned two reports, it is contended that since there is a dispute raised by the State about the right of the company and now by O. L. to sell the land of the company and hence, the views of the State be also taken into consideration
before directing sale of the land in question. Accordingly, on 21.02.2003, this court issued notice to State and called upon them to file reply as to whether company through O.L. can be granted permission to sell the land in question and / or whether State has any objection to that effect. In substance, the reply of the State is that they have a right of re-entry on the land in question no sooner it is noticed that the company has stopped the activities for which the land was given to company. According to State absolute ownership of the land has not vested in the company and hence, the O.L. may not be given permission to sell. In support both O.L. as also the State have filed documents.
Having heard the O.L. as also the State counsel and having perused documents filed by the parties in support of their respective contentions, I am of the view that it is a fit case to grant / accord sanction / permission to O.L. to sell the land in question.
In my considered view, it does appear from the documents submitted by the parties that a grant was made in favour of the company in liquidation as back as on 20.10.1912. It was so done by the then State of Gwalior in companies favour. It does look to be an irrevocable grant entitling the company to even sell and / or disposed of and / or transfer the land with a condition to use the land only for industrial purpose or a purpose akin to it for which the grant is made in company''s favour. It is now almost more than 91 years that no steps were taken by the State to even recognize their right of re-entry except when these proceedings were initiated. This indicate that the State has also recognized the right of the company to be in the nature of an irrevocable one. Moreover, there is no condition brought to my notice from any of the documents to which the company is a party to show that company is restrained by sale / transfer of the land in question. It is not in dispute that the company did construct the building and established a plant and run it for years with no objection being ever raised by State in comfirmity with the grant.
In my opinion, as per Government valuers report as reflected in the report of O.L. dated 20.02.2003, the land / buildings is quite valuable and if sold, the same can fetch better price. It will enable the O.L. to liquidate the dutes of several creditors / contributors / share holders etc of the company to a large extent. At the same time, care can be taken while allowing the O.L. t to sell the land to seek help of State''s concerned Industry Department to determine the use of land for a particular purpose so that the intending buyers of the land can continue to
use the land for the same purpose for which it was given to the company.
Accordingly, the O. L. is granted permission / sanction to sell the land / building belonging to company. The O.L. is accordingly directed to submit the detail proposal as regards the manner in which he proposes to dispose of the land / building. The O.L. is directed to seek help of concerned department of State for proposing the manner of sale of land keeping in view the requirement of several restrictions contained in Town Planning Laws having application to the area in question. In view of directions of Supreme Court for early disposal of the matter, the O.L. will ensure expeditious disposal by submitting the report on the next date of hearing."
The aforesaid order makes it very clear that the objection raised by the State Government has been dismissed. Thereafter, present appeal has been filed and the grounds raised by the State of Madhya Pradesh under grounds clause are as under:-
"1. That, the learned Company Judge has committed grave error in rejecting the objections of the State Government.
That, the title of the State Government is very clear from the documents filed with the objections.
That, the company was holding the land as lessee and as the factory has come to closure, the State has right of reentry u/s 182 of the M. P. Land Revenue Code, 1959.
That, it is wrong to hold that it was a permanent grant.
That, the learned Company Judge has committed an error in holding that no action has been taken for re-entry. It is humbly submitted that the proceedings u/s 182 of the MP Land Revenue Code, 1959 are already pending before the Additional Collector, Ujjain.
That, the impugned order holding that it was a lease under the Gwalior State and not covered under the MP Land Revenue Code, 1959 is patently contrary to law and also contrary to the judgment in State of MP Vs. Krishna Rao Shinde AIR 1991 S.C. Page 491.
That, the Company Judge has not considered the documents which were filed alongwith objections.
That, the approach of the Company Judge is contrary to law and deserves to be set aside."
This Court has carefully gone through the record of the case. The undisputed facts reveal that an order was passed by Commerce and Industry Department of the erstwhile Gwalior State in the year 1912 and a grant was made in favour of the Company in respect of land in question. Thereafter, the Company till date is in possession of the land in question.
Learned counsel for the appellant has argued before this Court that as its a lease land and as the Company has stopped functioning, the lease land gets reversed back to the State Government.
This Court has carefully gone through the order issued by the Gwalior State and the lease acceptance signed by the Company, the fact remains that the Company in liquidation is in possession of the land in question right from the year 1912. The final order passed by the the then State of Gwalior reveals that its a grant.
A similar matter came up before Gujarat High Court in the case of Legal Heirs of Deceased Fakirchand Ambaram Patel Vs. Official Liquidator, Amruta Mills Ltd.
reported in Company Cases (Vol.116) 588 and in the aforesaid case it was a lease granted in favour of the Company and the Gujarat High has held as under:-
"Properties of a company in liquidation vest in the court or the liquidator appointed by the court who acts as a custodian on behalf of the court. Such a vesting or custody of the properties is not only for the purpose of taking care of the interest of the creditors and contributories but also of the workmen who have pari pasu charge. This would enable the court to exercise jurisdiction in relation to all the properties of the company in liquidation including valuable assets like leasehold rights of unexpired portion of the lease. The corporate existence of the company in liquidation continues till dissolution and the liquidator steps into the shoes of the company. In case the court is not empowered to deal with an asset like leasehold interest of the company in liquidation it may, in a given situation, either give rise to or encourage malpractice by dishonest persons.
Leasehold interest is property which belongs to the company enabling the company to deal with the same.
Merely because the lessee company goes into liquidation and the liquidator is appointed, the rights of the company vis-a-vis its landlord do not undergo and change and they continue to be governed by subsisting contract.
One of the modes of termination of tenancy provided in section 114(g) of the Transfer of Property Act, 1882 is forfeiture. The tenancy can be said to be determined by forfeiture when a tenant incurs breach of an express condition which provides that on incurring of such breach the landlord is entitled to reenter the demised premises. Section 114 cannot be invoked in case where the tenancy is not determined by forfeiture. Therefore, it would become necessary to ascertain the mode by which the interest of the tenant in the premises comes to an end and the landlord becomes entitled to recover possession of the premises from the tenant. The period of a subsisting lease cannot be curtailed in the absence of a forfeiture clause in the lease deed. The contractual tenancy would, thus, subsist as governed by provisions of the Transfer of Property Act, 1882 and there cannot be any eviction from such tenancy.
Tenancy is primarily a contract between landlord and tenant. During subsistence of a contractual tenancy the tenant has
an estate or property in the subject matter of the tenancy and such an estate or property is heritable. Therefore, upon determination of such tenancy the estate does not necessarily disappear and the status of irremovability granted in favour of the tenant by the statute makes it clear that unless the decree or an order of eviction is made against the tenant he remains tenant as he was before the determination of the contract. Thus, the incidents of such tenancy, i.e., statutory tenancy and contractual tenancy are the same unless there is any provision in the Act conveying a contrary intention. The tenancy rights both in respect of the residential premises and commercial premises and commercial premises are heritable.
The liquidator may exercise discretion available to him under section 535 provided he finds that the property in question is of such a nature that it would be onerous to retain the property in liquidation proceedings having regard to the nature of the property. Therefore, apart from whether under the provisions of the Bombay Rent (Hotel and Lodging House Rates Control) Act, 1947 or the Transfer of Property Act, 1882 or the Contract Act, 1872, the applicants may or may not be entitled, there being a special provision under the companies Act, specifically prescribing the nature of property, and prescribing the procedure to be adopted, whether the applicants had been able to establish the existence of prerequisite conditions laid down in section 535 had to be examined.
The terms of the lease were mostly permanent or in perpetuity, or for long fixed periods or at least till the lifetime of the company. Therefore, the contracts entered into by the lessors with the company subsisted and the company would be entitled to seek protection under the contract de hors the provisions of the Bombay Rent (Hotel and Lodging House Rates Control) Act, 1947. In none of the cases, was it contended or pointed out that there was any breach of express condition which would entitle the landlord to invoke forfeiture. Even if non-payment of rent for a particular period could be treated as a breach of one of the conditions the terms of the lease deeds did not envisage forfeiture and in any case it would be open to the court to grant relief from forfeiture by issuing appropriate directions. However, these aspects had to be taken into consideration in each individual case, after the landlord applicant established not only non-payment of rent, but entitlement to forfeiture after serving notice for such forfeiture.
The conclusion summarized by the Gujarat High Court in the aforesaid case reads as under:-
"(a) Leasehold interest is an intangible asset, which is valuable in nature though the valuation may differ from case to case depending upon the unexpired period of lease.
(b) Such an asset is transferable subject to the same terms and conditions as may be stipulated in the lease deed.
(c) Once there is a contract which has not been determined, the relationship of the parties to the contract continues to subsist till the period for which the contract is in existence subject to an express condition to the contrary.
(d) There is a distinction between the point of time when an order of winding up is made and at the point of time when an order of dissolution is made, the company continues to exist between the two terminii.
(e) A condition in the lease deed permitting a lessee to give back the possession as and when the lessee chooses to do so cannot be converted into an obligation entitling the lessor to seek possession.
(f) A condition in the lease deed by way of requirement to pay rent, per se, does not create an onerous covenant, once readiness and willingness is shown by the lessee, or on its behalf, to discharge such obligation.
In light of what is stated hereinbefore, it is not possible to accept the case of the applicants. The possession of the land in question cannot be directed to be handed over to the applicant landlords for the various reasons stated hereinbefore. The applications are, therefore, rejected. There shall be no order as to costs."
In the considered opinion of this Court, even if it is presumed for a moment that it was lease granted in the year 1912, the Official Liquidator does have the power to sell the property of the Company as leasehold interest as against the property of the Company. However, in the present case, it
was a grant made in the year 1912.
The ground raised by the State of Madhya Pradesh refers to a case decided by the Hon''ble Supreme Court State of Madhya Pradesh and Ors. Vs. Krishnarao Shinde and Ors. reported in (1991) 2 SCC 81. The aforesaid case is having a distinguishable feature. In the aforesaid case property was leased out by the erstwhile Gwalior State and a fresh lease was subsequently executed by the successor state i.e. State of Madhya Pradesh and in those circumstances the Company therein was a government lessee under Section 81 of the M. P. Land Revenue Code, 1959 whereas in the present case it was a grant made in favour of the Company and the learned Single Judge has rightly arrived at a conclusion that the land belonging to the Company can be sold by the Official Liquidator as no lease deed was executed at any point of time by the State of Madhya Pradesh.
Not only this, while the appeal was pending before this Court, during the arguments a query was raised by this Court i.e. whether the State Government is ready to clear the dues of workmen or not. No concrete proposal was placed before this Court by the State Government and therefore, the matter is being decided on merits.
In the considered opinion of this Court, most of the workers are on death bed and no concrete proposal has been given to this Court by the State Government for clearing the dues of workmen and as this is a grant in favour of the Company by the erstwhile Gwalior State, the Official Liquidator is certainly empower to dispose of the land in accordance with law by following the prescribed procedure by selling the asset of the Company.
In respect of the other ground that so far as the proceeding under Section 182 of M. P. Land Revenue Code, 1959 for taking possession of the land is concerned, the proceeding cannot be permitted to continue in light of the pendency of the company petition and the pendency of the proceeding or a final order passed in the matter will be a nullity, passed during the pendency of the company petition in light of Section 446 of the Act of 1956.
There are large number of intervention applications and when the matter was argued before this Court large number of old and disabled people were present and a prayer was made to decide the matter this way or that way as they wanted to know the fate of the company appeal.
It is true that the order passed by the learned Company Judge was passed in the year 2004, however,
keeping in view the pendency of large number of cases, the appeal could not be heard and now it has been heard on merits. The appeal is dismissed with a request to the learned Company Judge to expedite process of selling the assets and land of the Company at an early date.
With the aforesaid, the company appeal stands dismissed.